PSE, PDS urge Congress to pass CREATE bill

National, News

The Philippine Stock Exchange, Inc. (PSE) and the Philippine Dealing System Holdings Corp. (PDS) have urged Congress to swiftly pass the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) to make the Philippines an attractive investment hub in the region and help make the domestic capital market a viable venue for raising funds.

In a recent joint statement sent to Finance Secretary Carlos Dominguez III, the PSE and PDS expressed their strong support for CREATE, which they described as “a landmark bill in a series of reform measures undertaken by this administration.”

“We respectfully urge both houses of Congress to prioritize the immediate passage of the CREATE bill so  the country can fully reap the benefits of this reform bill without delay,” their statement said.

The statement of support was signed by PSE president Jose Pardo, PDS chairman Cezar Consing, and Ramon Monzon, the president-chief executive officer of both the PSE and PDS, signed the statement.

The two agencies also thanked the Department of Finance (DOF) “for tirelessly working to ensure the timely approval” of CREATE, which represents the second package of the Duterte administration’s Comprehensive Tax Reform Program (CTRP).

The immediate lowering of the corporate income (CIT) tax to 25 percent for large businesses and foreign corporations, and to 20 percent for micro, small and medium enterprises (MSMEs) with a net taxable income of P5 million and below and total assets of not more than P100 million (excluding land), will leave more funds in the hands of publicly listed companies either for business expansion or distribution to stockholders, the PSE and PDS said.

“The investment of said tax savings in other business undertakings or investment vehicles can set off a chain of positive economic consequences such as employment generation, higher spending, and increased domestic business activity as a result of the multiplier effect,” they added.

They stressed that immediately reducing the CIT and enhancing the flexibility of the country’s fiscal incentives system to bring in investments that will generate the most benefits for the Filipino people will also make the country more competitive with its peers in the ASEAN region. The Philippines’ current CIT rate of 30 percent is the highest in Asean.

Aside from the CREATE bill, the PSE and PDS also expressed their support for the expansion of the list of transactions qualifying as tax-free exchanges in Section 40(C)(2) of the National Internal Revenue Code (NIRC).

They also backed the removal of the requirement to obtain prior confirmation or tax ruling from the Bureau of Internal Revenue (BIR) for availing of this benefit in Section 40(C)(2) of the Tax Code. Such reforms “will streamline the process of reorganization typically conducted by companies preparatory to going public,” they added.

“This is a very welcome development and a move that has long been clamored for by the market,” the PDS and PSE jointly pointed out.

Along with CREATE and the removal of the initial public offering (IPO) tax under RA 11494 or the Bayanihan to Recover as One Act (Bayanihan 2), these reforms on tax-free exchanges “will spur business creation in the Philippines, incentivize capital-raising activities in the Philippine capital market, and overall, accelerate the country’s recovery from economic losses brought about by the Covid-19 (coronavirus disease 2019) pandemic,” they pointed out.

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